In so many words, Greece (as an EU member state) lacks monetary sovereignty and must run its finances like a private entity because the ECB will not monetize its debt (by EU treaty prohibition and ideological opposition).

For the past 30 years politicians of the right have been using the idea of running the state like a private firm, but it mostly hasn't worked with the voters. It also was an economic fantasy. However, at least in the EU the institutional structures have been reformed in the direction dictated by Neoclassical economics and neoliberalism, resulting in a system in which operating according to the Austrian economic fantasies is the only legal possibility. This doesn't mean that macroeconomically this is less nonsensical than it ever was, but we have now managed to write this nonsense into the rules of the game whereas before it was all politics.

Now, one thing this means is that the state is in no position to provide any guarantees. Something like the restructuring of General Motors is not possible in the Eurozone (or no sensible government should attempt it, given the fiscal and monetary constraints under which it now operates). Also, bank guarantees are criminally reckless, and I have my doubts about deposit guarantees without an actual fund backing them.

Then surely they will expect Spain to allow banks with large exposure to Portugal to simply default and be resolved in the case that Portugal defaults. But, clearly they don't. And it is criminal to allow a default on lightly capitalized German banks.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

So what does Bini Smaghi say about voters? Never mind them, the inevitable must be applied by a government of national unity or at least an agreement between government and opposition, because there is no alternative:

- Meanwhile, Portugal, during the election campaign, asked the Union for help. Will an agreement be found that will be accepted by the next government, whichever it may be? BS: There is no alternative to reorganization and reform. Portugal's problem is low growth. To cope with a crisis like the one it is going through calls for the unity of the country, with an agreement between the majority and the opposition about how to return to healthy public finances and to adopt courageous reforms that restore the country's competitiveness. Otherwise, the internal political games are likely to prevail over the national interest. This is true for Portugal, but also for Greece.

The only "courageous reform" available that would let Greece "to return to healthy public finances" is for the Greek Government to default on all or part of the foreign debt, starting with the debt from those who have been talking up the risk of default. If that were followed by Portugal doing the same and Ireland providing huge haircuts on its bonds to foreign banks the ECB, IMF, Germany and France, along with the relevant EU organizations would possibly be too busy dealing with more important problems to pay much attention to Greece. Greece could help itself domestically by issuing a domestic currency, going after what ever wealth of the Greek oligarchs it could, stopping the rent seeking by the financial sector and stop worrying about the dictates of the "troika".

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."